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RE: st: RE: xtivreg2, error 198


From   "Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>
To   <statalist@hsphsun2.harvard.edu>
Subject   RE: st: RE: xtivreg2, error 198
Date   Thu, 25 May 2006 14:58:44 +0100

Simon,

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu 
> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of 
> Simon Lüchinger
> Sent: Thursday, May 25, 2006 2:43 PM
> To: statalist@hsphsun2.harvard.edu
> Subject: Re: st: RE: xtivreg2, error 198
> 
> Mark,
> 
> thanks a lot for your answer. Yes, I think -nonest- and 
> -dfadj- would suit my needs; unfortunately, I cannot realy 
> test them, because my Stata dates from the time you wrote the 
> -xtivreg2-, i.e. before -xtreg- had the cluster option. Of 
> course, it would be fantastic if you could put -nonest- and 
> -dfadj- into -xtivreg2- someday.
> 
> As a first approximation, I demeaned all my variables and 
> estimated the model with -ivreg2- and the cluster option; I 
> am aware that the SEs are too small and a dof adjustment is 
> needed. My question is, however, whether this approach yields 
> the same result as -xtivreg2- with the
> -nonest- option would.

I think the answer is yes, but you can check - just try demeaning by hand as you have done, and estimate using ivreg2 but clustering on the id variable.  If the results are identical to xtivreg2 with cluster, you've confirmed it.

Cheers,
Mark

Prof. Mark E. Schaffer
Director
Centre for Economic Reform and Transformation
Department of Economics
School of Management & Languages
Heriot-Watt University
Edinburgh EH14 4AS  UK
44-131-451-3494 direct
44-131-451-3296 fax
http://www.sml.hw.ac.uk/cert


> Best regards
> 
> Simon
> 
> 
> > The problem is interesting but tricky.  The usual classical 
> and robust 
> > var-cov matrix for the fixed effects estimator need a degrees of 
> > freedom adjustment for the fixed effects (see any textbook 
> treatment).
> >
> > The cluster-robust var-cov matrix doesn't need this adjustment, so 
> > long as the panels (corresp. to the fixed effects) don't span more 
> > than one cluster.
> >
> > The problem arises when the panels cut across clusters.  Some dof 
> > adjustment is needed, but what should it be?  I don't know, and I 
> > haven't seen any paper that describes exactly what it 
> should be.  When 
> > writing -xtivreg2-, I opted simply for the program to exit 
> with error.
> >  Official -xtivreg- now has the -nonest- and -dfadj- options; these 
> > didn't exist when I wrote -xtivreg2-.  You'll see that they 
> allow you 
> > to go between the extremes of no dof adjustment (which will 
> give you 
> > SEs that are too small) and a full dof adjustment (which 
> will give you 
> > "conservative" SEs that are on the large side).  Have a 
> look at them 
> > and see if they would suit your needs.  I could perhaps put 
> them into 
> > -xtivreg2-....
> >
> > Cheers,
> > Mark
> >
> > Prof. Mark Schaffer
> > Director, CERT
> > Department of Economics
> > School of Management & Languages
> > Heriot-Watt University, Edinburgh EH14 4AS tel 
> +44-131-451-3494 / fax 
> > +44-131-451-3296
> > email: m.e.schaffer@hw.ac.uk
> > web: http://www.sml.hw.ac.uk/ecomes
> 
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